Quiz Sales Comparison Approach Ch 5-6

Question 1

“A lump-sum payment or series of payments to the lender that reduces the interest payments of the borrower” is the definition of a(n)

Answer 1

Buydown

Question 2

“A mortgage that has priority over all other mortgage liens on a property” is a ___________ mortgage.

Answer 2

First

Question 3

“A pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions” is the definition of a

Answer 3

Mortgage

Question 4

“Liens placed on a property after a previous lien has been made and recorded; a lien made subordinate to another by agreement” are called __________ liens.

Answer 4

Junior

Question 5

“Mortgages that are neither insured nor guaranteed by an agency of the government, although they may be privately insured” is the definition of ______________ mortgages.

Answer 5

Conventional

Question 6

A “point” is ___% of _______________.

Answer 6

1, loan amount

Question 7

A cash equivalency adjustment may be required when the loan is:

Answer 7

Seller financed at a below-market interest rate

Question 8

A home sold five months ago for $232,000. Since then, property values in that location have appreciated by 1% per month. (Use simple interest.) You want to use it as a sale comp in an appraisal and the location of the sale comp is superior to the location of your subject property and deserves a 10% negative adjustment because of the superior location. What is its adjusted sale price?

Answer 8

219240. First step is to apply the market conditions (time) adjustment . . . $232,000 X 1.05 = $243,600. Second step is to apply the location adjustment to the sale price adjusted for market conditions . . . $243,600 X .90 = $219,240.

Question 9

A mortgage that is not fully amortized at maturity and requires a lump sum payment of the outstanding balance at the end is called a ____________ mortgage.

Answer 9

Balloon

Question 10

A mortgage with equal payments for each period over the length of the loan is called a __________ loan.

Answer 10

Fixed rate

Question 11

A property has a first mortgage of $120,000, a second mortgage of $30,000, and a third mortgage of $15,000. It is foreclosed and sold for $145,000. The holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________.

Answer 11

0, $25,000

Question 12

A property has a first mortgage of $125,000, a second mortgage of $30,000, and a third mortgage of $10,000. It is foreclosed and sold for $140,000. In this situation, the holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________.

Answer 12

0, $15,000

Question 13

A property sold for $256,000 and sold again 11 months later for $289,000. What was its percent of increase?

Answer 13

12.9%. $289,000 ÷ $256,000 = 1.129 or 12.9%

Question 14

A property sold in November for $312,500. It sold again 9 months later for $354,800. What was its average monthly rate of appreciation?

Answer 14

1.5%. $354,800 - $312,500 = $42,300. $42,300 ÷ 312,500 = .135. .135 ÷ 9 = 0.015 or 1.5%

Question 15

A property sold in October for $412,500. It sold again 9 months later for $471,900. What was its average (not compounded) monthly rate of appreciation?

Answer 15

The question is asking for the “average” monthly not the “compounded” rate of increase. The average rate is found by finding the total change, dividing that by the original price which will give the total percentage change. That is divided by the number of months to determine the average monthly rate of change. This is different than the monthly compounded rate, which will be slightly lower, because each month the beginning balance for that month included the increase from the previous month, so the rate of change can be lower to achieve the same result. $471.900 ÷ $412,500 = 1.144 or 14.4%. 14.4% ÷ 9 = 1.6%

Question 16

A purchaser bought a property for $215,000, put 15% down and borrowed the rest at 6.75% interest for 25 years. The lender charged 2.5 points at the closing. How much was paid for the points?

Answer 16

4568.75. $215,000 X .15 = $32,250. $215,000 - $32,250 = $182,750 mortgage. $182,750 X .025 = $4,578.75.

Question 17

A type of mortgage designed for retirees and other fixed-income homeowners who owe little or nothing on their homes is called a _________________ mortgage.

Answer 17

Reverse annuity

Question 18

An ARM is

Answer 18

An adjustable rate mortgage

Question 19

Another name for a land contract is a(n)

Answer 19

Installment sale contract

(seller receives payment in installments, title is transferred when paid in full, also called contract for deed)

Question 20

Cash equivalency adjustments are typically made when

Answer 20

A transaction involved non-market financing

Question 21

Changes in a market cycle may be ____________.

Answer 21

cyclical, one-time-only

Seasonal, exponential

(Exponential - continuously increasing at a rapid rate)

Question 22

Fannie Mae expects that the appraiser should provide which date or dates for each comparable sale?

Answer 22

Sales contract and the closing date

Question 23

Houses on the north side of town sold for a median price of $186,420 twelve months ago and that the median price of those homes for the current month is $214,975. What is the percent of increase?

Answer 23

15.3%. $214, 975 ÷ $186,420 = 1.153 or 15.3%.

Question 24

If a sale is not arm’s-length, the appraiser

Answer 24

May either discard it or use it with adjustments

Question 25

In the sales comparison approach, which of these factors should be adjusted for before the others? 

Answer 25

Market conditions

Question 26

Long-term market cycles are caused by:

Answer 26

National or international conditions

Question 27

Market condition adjustments are also commonly known as 

Answer 27

Time adjustments

Question 28

Mortgage assumptions are xxx when xxx are xxx.

Answer 28

Attractive when rates are rising

Question 29

Mortgages that are either insured by the FHA or guaranteed by the VA:

Answer 29

Tend to offer favorable terms

Question 30

Mortgages with payments that start out low and gradually increase are called _____________ loans. 

Answer 30

Graduated payment

Question 31

The definition of arm's length is a transaction between ___________ parties under no _______. 

Answer 31

Unrelated, duress

Question 32

The definition of arm's-length is a transaction between ___________ parties acting in their own _______ interests.

Answer 32

Unrelated, best

Question 33

The life cycle of a market area typically includes the stages of growth, _____________, decline and _______________.

Answer 33

stability, revitalization

Question 34

The primary participants in the secondary mortgage market are

Answer 34

Fannie Mae, Freddie Mac, and Ginnie Mae

Question 35

The real estate market tends to be  an xx responder to xx-term economic cycles

Answer 35

An early responder to short-term economic cycles

Question 36

The term ARM means 

Answer 36

Adjustable rate mortgage

Question 37

Two-bedroom condos in the city sold for a median price of $180,440 nine months ago and that the median price of those homes for the current month is $206,390. What is the indicated average increase per month? 

Answer 37

1.6%. $206,390 ÷ $180,440 = 1.144; that equals 114.4% of the original median price. Take out the 100% and it leave 14.4% as the increase. 14.4% ÷ 9 months = 1.6% per month.

Question 38

What happens when the borrower defaults on a VA mortgage and causes a loss to the originating lender? 

Answer 38

The VA reimburses the lender for the loss 

Question 39

Which of the following are LIKELY to be factors that can help you analyze changes in local market conditions? 

Answer 39

Foreclosure rates in the area, Amount of new construction available for sale, Instances of seller financing

Question 40

Which of the following is a guaranteed loan?

Answer 40

VA

Question 41

Which of the following is an insured loan? 

Answer 41

FHA

Question 42

Which of the following would be classified as a long term trend for market cycles? 

Answer 42

Population trends, Income levels, Migration patterns

Question 43

Which of the following would be classified as a short term trends for market cycles? 

Answer 43

Availability of financing, Interest rates, Loan to value ratios

Question 44

Which of these do originate mortgage loans? 

Answer 44

Savings and loan, Commercial bank, Credit union

Question 45

Which would typically be a cause of duress that could result in a transaction that would not be considered arm's length? 

Answer 45

Sale to a relative, Sale with an unknowledgeable buyer or seller, Sale prior to an impending foreclosure

Question 46

With a land contract, title passes when the seller delivers the deed _________. 

Answer 46

When the total price is paid

Question 47

You are in a very hot real estate market with values going up monthly by 2%, and lenders are taking months to process transactions, creating extended closing times. As an appraiser, you should:

Answer 47

Adjust the comparables from their contract date of sale to the effective date of the appraisal

Question 48

You live in a summer resort town. Real estate prices typically drop 15% during autumn and winter. A house sold for $200,000 in July. What would it sell for in December?

Answer 48

170000. $200,000 X .85 = $170,000.

Question 49

You live in a summer resort town. Real estate prices typically drop 15% during autumn and winter. A house sold for $250,000 in July. What would it sell for in December? 

Answer 49

212500. With your 12C enter: 250,000 ENTER 85% Answer is $212,500.

Question 50

You live in a winter resort town. Real estate prices typically rise 20% during autumn and winter. A house sold for $200,000 in July. What would it sell for in January? 

Answer 50

240000. With your 12C enter: 200,000 ENTER 120% Answer is $240,000.

Question 51

Your research of a comparable sale reveals that the purchase price was $200,000, but the purchaser realized the property needed extensive repairs to the mechanical systems. The estimated cost to cure the problems was $15,000 but the actual costs turned out to be $20,000. What should you do?

Answer 51

Adjust the property sale price by $15,000 (since the purchase price was adjusted based on the estimate!)

Question 52

Your subject is located in an area where property values have been declining consistently at 0.5% a month for the past ten months. You have located a comparable that is practically identical to your subject. It sold 8 months ago for $200,000. How much should you adjust the price? 

Answer 52

minus 8000

Question 53

Your subject is located in an area where property values have been rising consistently at 1.5% a month for the past twelve months. You have located a comparable that is practically identical to your subject. It sold seven months ago for $200,000. How much should you adjust the price? 

Answer 53

21000. 7 X 0.015 = 0.105. 0.105 X $200,000 = $21,000.

Question 54

What are the 4 phases of Market Areas?

Answer 54

Growth Stability Decline Revitalization